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The dollar index is sharply higher on May 19 and this is having a major negative impact on precious metals, grains and the petroleum complex.

Soybean oil:

July soybean oil lost 29 points on volume of 86,958 contracts. Total open interest declined by 394, which relative to volume is approximately 80% below average. The July contract lost 2,581 of open interest. As this report is being compiled on May 19, July soybean oil is trading 72 points lower and is currently trading at the lows of the day.

Although, July soybean oil has been on a short and intermediate term buy signal, we have discouraged bullish positions because of our concern with the bearish set up in soybeans. Additionally, on May 15, the July contract made a high of 33.72, which is only 8 points above March 2 high of 33.64. In short it looks like soybean oil has made a double top approximately 2 1/2 months after the previous major high. The July contract will generate a short-term sell signal if the daily high is below OIA’s key pivot point for May 19 of 31.91. Stand aside.

Chicago wheat:

July Chicago wheat advanced 10.75 cents on relatively heavy volume of 131,792 contracts. Total open interest declined by 6,260, which relative to volume is approximately 75% above average meaning liquidation was heavy on the advance. The July contract made a high of 5.30 1/4, and then sold off into the close.

As this report is being compiled on May 19, the July contract is trading 12.75 cents lower and has made a daily low of 5.03 3/4, which is below yesterday’s print of 5.08. It is difficult to determine whether yesterday’s high was the final print on the short covering rally, but regardless July Chicago wheat remains on a short-term buy signal, and an intermediate-term sell signal. Stand aside.

Live cattle:

June live cattle lost 95 points on volume of 42,653 contracts. Total open interest declined just 98 contracts, however the June contract lost 2,911 of open interest, which means there were sufficient open interest increases in the forward months to offset most of the decline in June. Open interest action on May 18 was somewhat negative.

As this report is being compiled on May 19, the June contract is trading 60 points higher and has made a daily low of 1.51050, which is just fractionally below yesterday’s print of 1.51100. Since the generation of the short-term buy signal on May 14, the market has experienced two days of corrective action and is rallying on the third day. For those of you who are bullishly inclined, positions can be entered at current levels with an exit point below today’s low.

WTI crude oil: July WTI crude oil is getting close to generating a short-term sell signal. Tomorrow we will report on the status of Brent crude.

July WTI crude oil lost 30 cents on volume of 608,339 contracts. Total open interest declined by a massive 46,950 contracts, which relative to volume is approximately 210% above average meaning liquidation was extremely heavy on the modest decline. The June contract lost 52,077 of open interest. May 18 was the second day out of the last three that open interest declined by an unusually large amount.

On May 14, WTI lost 62 cents and total open interest declined by 50,041 contracts on volume of 736,287. In short, market participants have been heavily liquidating and this continues on May 19. As this report is being compiled, the July contract is trading $1.89 lower and is trading at the lows the day.We have been skeptical about the long side of crude oil for quite some time and our reports of May 10 and 17 describe our concerns.The July contract will generate a short-term sell signal is the daily high is below OIA’s key pivot point for May 19 of 59.19.

Natural gas:

June natural gas lost 1.8 cents on light volume of 250,430 contracts. Total open interest increased by 4,465 contracts, which relative to volume is approximately 25% below average. The June contract lost 10,373 of open interest. We consider the open interest action on May 18 to be slightly bearish.

As this report is being compiled, June natural gas is trading 6.9 cents lower after making a new high for the move of 3.105, which is the highest print since February 23, 2015 (3.096).The market has come very far in a short period of time after making its contract low on April 27. As we have said before, we see the rally is technical in nature and there isn’t fundamental justification for significantly higher prices. However, June natural gas remain on the short and intermediate term buy signal and the trend remains up.

Gold: On May 18, August gold generated an intermediate term buy signal after generating a short-term buy signal on May 14.

August gold advanced $2.30 on light volume of 140,652 contracts. Total open interest increased by 1,917 contracts, which relative to volume is approximately 40% below average, however the June contract lost 5,131 of open interest, which makes the total open interest increase more impressive (bullish).

As this report is being compiled on May 19, August gold is trading sharply lower, down 20.60 on a sharply higher dollar. We have been cautioning clients to wait for a pullback before considering bullish positions. This is the first day of the pullback and we expect at least one more day of corrective activity before bullish positions should be considered. Also, we want to see open interest decline in today’s action.

Silver:

July silver advanced 16.9 cents on volume of 44,984 contracts. Total open interest declined by 675 contracts, which relative to volume is approximately 40% below average. The July contract accounted for loss of 1,865 open interest. As this report is being compiled on May 19, July silver is trading 67.7 cents lower and has made a loaf of the move of 16.870.

We have been cautioning clients to wait for a pullback before considering bullish positions. This is the first day of the pullback and we expect at least one more day of corrective activity before bullish positions should be considered. Like gold, we want to see open interest decline in today’s action.

Dollar index:

The June dollar index gained 1.089 points on volume of 38,060 contracts. Total open interest increased by 497 contracts, which relative to volume is approximately 45% below average, but an open interest increase on yesterday’s price advance is bullish. Additionally, as we have commented before, open interest has been declining throughout the slide in the index, which also is positive.

As this report is being compiled on May 19, the June dollar index is trading 1.206 points higher on heavy volume. Despite the very positive action of the past two days, the dollar index remains on a short and intermediate term sell signal. We have no recommendation.

Euro:

The June euro lost 1.61 cents on surprisingly light volume of 207,689 contracts. Total open interest declined by a strong 8,161 contracts, which relative to volume is approximately 55% above average meaning liquidation was extremely heavy on the large decline. As this report is being compiled on May 19, the June contract is trading sharply lower again, this time by 1.70 cents and has made a new low for the move of 1.1122, which takes out the previous low print of 1.1136 made May 11.

Despite the sharp move lower during the past two days, the June contract will not generate a short or intermediate term sell signal on May 19. The reason given for today’s decline was a comment by a member of the ECB who said that bond buying by the ECB would be front loaded during the summer months. Conceivably, the action by the ECB may have spelled the end to the euro rally. However, we will have a better idea when we see the strength and open interest action of a counter trend move.

British Pound:

The June British pound lost 95 pips on volume of 81,495 contracts Total open interest increased by 341 contracts, which relative to volume is approximately 80% below average on a however and open interest increases on yesterday’s price decline is bearish. As this report is being compiled on May 19, the June pound is trading 1.56 cents lower on the day. Like the euro, we will have a much better idea if the rally has fizzled when we see the strength and open interest action on a counter trend move higher.The June British pound remains on a short and intermediate term buy signal.

Australian dollar:

The June Australian dollar lost 66 pips on volume of 52,446 contracts. Total open interest increased by 884, which relative to volume is approximately 30% below average, however an open interest increase on yesterday’s price decline is bearish. As this report is being compiled, the June contract is trading 66 pips lower on the day. The June Australian dollar remains on a short and intermediate term buy signal.

Cotton: July cotton will generate a short-term sell signal if the daily high is below OIA’s key pivot point for May 19 of 65.16.

July cotton lost 1.92 cents on volume of 26,614 contracts. Total open interest declined by a massive 2,883 contracts, which relative to volume is approximately 320% above average meaning liquidation was off the charts heavy in yesterday’s trade. As this report is being compiled on May 19, July cotton is trading 63 points lower was made a daily low of 64.05, which is the lowest print since 62.70 made April 23.

Coffee:

July coffee advanced 4.90 cents on volume of 30,806 contracts. Total open interest declined by 899 contracts, which relative to volume is approximately 5% above average.This is bearish open interest action relative to the price advance. As this report is being compiled on May 19, July coffee has closed at 1.3985, down 3.30 cents and has made a daily low of 1.3820. For July coffee to generate a short term buy signal, the low of the day must be above OIA’s key pivot point for May 19 of 1.3920.The market has not had the strength to generate a short-term buy signal, though it has come close. July coffee remains on a short and intermediate term sell signal. Stand aside.